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IBM Leads the Dow on Strong Retail Sales

Dividend Stalwart IBM is up as investors hope for a 18th straight year of dividend increases.

The Dow Jones Industrial Average(DJINDICES:^DJI) is up slightly following a better-than-expected retail sales report. As of 1:15 p.m. EDT the Dow was up 7 points, or 0.05%, to 14,475. Meanwhile, the S&P 500(SNPINDEX:^GSPC) is up 0.15% to 1,555.

There were three U.S. economic releases today.

Report

Period

Result

Previous

Retail sales

February

1.1%

0.2%

Retail sales excluding-automobiles

February

1%

0.4%

Import price index

February

1.1%

0.6%

Inventories

January

1%

0.3%

Source: MarketWatch U.S. Economic Calendar.

The one to pay attention to is the retail sales report from the Department of Commerce, which showed that retail sales rose at their fastest monthly rate in five months, up 1.1% from January to a seasonally adjusted $421.4 billion. Year over year, retail sales were up 4.6%. Retails sales are an especially important metric to watch, as consumer spending makes up 70% of the U.S. economy. Economists had been expecting a gain of only 0.7% as the increased payroll tax and rising gasoline prices ate into consumers' wallets.

Spending at grocery stores rose 0.7%, while spending at restaurants fell 0.7%, indicating that consumers are eating at home more. Consumers also spent less money at department stores, on home furnishings, on electronics, and on appliances. Consumers did not slow spending on their cars, however: Automobile sales rose 1.1% in February, showing continued strength for the time being. Spending at gasoline stations rose 5%, reflecting February's higher gasoline prices. Except in California, gasoline prices have not crossed the psychologically significant $4 level at which you start to see consumers trying to limit their gasoline purchases.

For the time being, the economy is chugging along slowly. It remains to be seen whether this can continue with consumers cutting back spending in every area but automobiles.

Author

Dan Dzombak has written for The Motley Fool since 2008. He covers value investing, investing process, and success among other things. You can follow him on Facebook or Twitter by clicking the buttons below or head over to his blog at http://www.DanDzombak.com